Primary and secondary trends unchanged for precious metals, their miners and interest rates
Under Schannep’s Dow Theory
Eight days ago I wrote that I was seeing weakness in the internals of the market (not reflected in the indices). I also wrote that such weakness was harbinger of a change of trends at least of secondary proportions. Well, the developments of last few trading days have resulted in a hefty decline. Yesterday, January 31, both the time and extent requirements for a secondary reaction were fulfilled and hence a secondary reaction was signalled. The Industrials and the S&P 500 have declined for 10 trading days, and the Transports have declined for 11 trading days. As per Schannep’s Dow Theory we need at least 8 trading days of declines as the average of the three indices. Furthermore, the decline should exceed 3% on at least two indices.
You’ll find the relevant numbers in the spreadsheet below
All in all, US stock indices are in a secondary reaction. The primary trend remains bullish as was explained here and here.
Here you have an updated chart. The orange rectangles on the right side of the charts display the ongoing secondary reaction.
|Secondary (bearish) reaction against primary bull market|
Under the classical/Rhea Dow Theory
While the time requirement (and even the extent) requirement is not carved in stone, I’d like to see at least three weeks of declines, which tends to be the “standard” definition of a secondary reaction as per the classical Dow Theory. When the time requirements get fulfilled, then we will occupy ourselves with the extent requirement (either just demanding a -3% confirmed declined or being more purist and demanding a confirmed retracement of at least 1/3 of the current primary bull swing. For our Dow Theory purposes, a primary bull swing means the distance between the lows of the last completed secondary reaction (or, in its case, primary bear market lows if there was no secondary reaction) and the last recorded primary bull market highs.
All in all, if we appraise the trend under the “Rhea/classical” Dow Theory, the primary trend is bullish since April 1st, 2019, as was explained here
The secondary trend is bullish, as the Transport bettered on January 14, 2019 their secondary reaction closing highs (of 04/29/2019) hence confirming the Industrials.
GOLD AND SILVER
The primary trend was signaled as bearish on 11/07/2019 as was profusely explained here
The secondary trend is bullish (secondary reaction against the primary bear market) as was profusely explained here.
On 1/6/2020 GLD broke up above the last recorded primary bull market highs unconfirmed by SLV. Lack of confirmation implies that we cannot declare the end of the current primary bear market until SLV break up above its primary bull market highs. In the charts below the blue horizontal lines depict the relevant levels to be bettered. The charts below display the price action from mid November 2019 to date.
|SLV must break up above the last primary bull market highs so that a primary bull market is signaled|
GOLD AND SILVER MINERS ETFs
The primary trend is bullish since 12/18/2018 as explained here. No changes. This specific signal is now more than one year old. Hence, we are dealing with a trade whose duration seems quite in line with what is to be expected under the Dow Theory (trades lasting more than one year on average, please mind the word “on average”).
On 09/04/2019 SIL and GDX made its last recorded primary bull market closing highs. From that date both ETFs declined and the secondary trend turned bearish (secondary reaction against the primary bull market) as explained in-depth here. The secondary reaction closing lows were jointly made on 10/15/2019
On 10/25/2019 the setup for a primary bear market has been completed as explained here
From that date GDX flirted with violating its secondary reaction closing lows which it did not. SIL was much stronger and has hitherto remained at a safe distance of those lows.
On 12/24/2019 SIL bettered its primary bull market closing highs unconfirmed by GDX. (blue arrow on the right side of the upper chart). Hence, we cannot declare the secondary reaction as extinguished. Thus, we remain in a primary bull market with an ongoing secondary reaction.
US INTEREST RATES
As it was explained here, TLT and IEF (two ETFs that relate to US interest rates) are in a bull market (since 12/18/2018 or 11/19/2018 depending on the way one appraises the secondary reaction). I also explained that they are currently under a secondary reaction.
One the Dow Theorist